Are Subscription Boxes the Way of The Future? Under Armour, Gap and JCPenney Think So

Subscription boxes gained popularity with the launch of Birchbox in 2010. Customers liked the idea of receiving a box each month of beauty samples from Birchbox for only $10 per month. The ability to surprise and delight customers with new and interesting products fueled Birchbox’s success. Fast forward to 2018 and Birchbox is struggling. The success of its business drew competition from Sephora, Ipsy and Allure magazine which all offer their own beauty subscription boxes now.

Even with the convenience of receiving a curated set of items at your home each month consumers still like to shop in stores. According to research from Blue Apron, the most popular subscription box service in the US, 69% of consumers said the availability of its meal kits in grocery stores would increase their likelihood of trying them. As a result Blue Apron has tried a number of offline initiatives to increase sales including pop-ups and selling meal kits in selected Costco locations. Blue Apron’s CEO Brad Dickerson said on an earnings call: "this is less about trying to get customers in Costco to come online, [and more] about trying to meet the customers on their terms."

While many of the initial subscription box businesses were run by companies without retail stores a number of traditional retailers see opportunities for growth in this space. These retailers include Under Armour, Gap and JCPenney.

Under Armour

In November of 2017 Under Armour launched ArmourBox a subscription clothing service. Customers of this service receive 4-6 clothing items every 30, 60 or 90 days. Customers must complete a questionnaire outlining their style preferences as well the types of activities they engage in. Customers are not charged a monthly subscription fee and receive a 20% discount on all of the items they choose to keep. They can also return any items they do not wish to keep.

Gap

In October of 2017 Gap launched a subscription box service for its baby brand called babyGap OutfitBox. The box contains six clothing items and is sent to the customer’s home every three months. The items cost more than $100 but retail for only $70. The service reduces the need to frequently shop for new clothing. If parents do not make changes to the size of clothing requested they are automatically sent new sizes based on the age of the child. There is no membership fee.

JCPenney

In December of 2017 JCPenney announced that it will launch a subscription box service in partnership with Bombfell. The service provides big and tall items for men which is a growing segment in the US according to JCPenney. Customers take a style quiz online then five items are sent to the customer based on their style preferences. There is a $20 styling fee that can be credited against the items the customer keeps. Customers also receive discounts based on how many items they buy.

NPD Group estimates that 35% of consumers “don’t even know” what a subscription service is and only 15% of consumers have ordered subscription boxes. If these retailers have a winning strategy they may be able to gain a foothold in the market and capitalize on growth once this service is more broadly known and used.

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